Echelon General Insurance Co. v. Ontario (Minister of Finance) 

Appeal of a preliminary arbitration award which found the insurer’s policy expired at the end of the six month term and therefore was not in force at the time of the accident. The Court of Appeal found the insurer failed to give notice of renewal or non renewal as required by s.236(1) of the Insurance Act and pursuant to s.236(5), the insurance policy remained in force at the time of the accident.

[2016] O.J. No. 4264

2016 ONSC 5019

Ontario Superior Court of Justice

August 11, 2016

W.M. Matheson J.

On May 15, 2010, Mr. Farah was involved in an accident. He was a pedestrian and was struck by a motor vehicle owned by the insured.

On November 29, 2008, the insured purchased a 6 month policy for his vehicle. On December 9, 2008, 10 days after the policy commenced, the insurer sent the insured a letter that purported to cancel the insurance policy due to non payment of a premium. The parties agreed for the purposes of the proceeding that the insurer’s attempt to cancel the insurance policy was invalid.

The insurer received no response to its correspondence and there was no further communication between it and the insured.

The accident took place on May 15, 2010, approximately one year after the 6 month policy term.

S.236 of the Insurance Act states as follows:

236. (1) If an insurer does not intend to renew a contract or if an insurer proposes to renew a contract on varied terms, the insurer shall,

(a) give the named insured not less than thirty days notice in writing of the insurer's intention or proposal; or

(b) give the broker, if any, through whom the contract was placed fortyfive days notice in writing of the insurer's intention or proposal.

(5) A contract of insurance is in force until there is compliance with subsections

(1), (2) and (3).

The insurer proceeded to arbitration with Her Majesty the Queen in Right of Ontario as represented by the Minister of Finance which administered the Motor Vehicle Accident Claims Fund for a determination of whether the insurance policy had lapsed or expired prior to the date of the accident. The arbitrator concluded the insurance policy expired at the end of the 6 month term and therefore was not in force at the time of the accident. As a result, the Motor Vehicle Accident Claims Fund was obliged to reimburse the insurer for amounts paid to Mr. Farah.

The Minister of Finance appealed the arbitrator's decision. The insurer took the position it did not bear the consequences of giving no notice because the policy had expired on its terms by the time of the accident. The insurer submitted that the notice obligations only applied during the term of the policy.

The Court of Appeal found that s.236 imposes a mandatory obligation on insurers to give certain notices, including notice of non renewal. Section 236(5) provides, in turn, that the contract of insurance is in force until there is compliance with this notice obligation. The Court of Appeal noted that s.236(5) ousts the common law of contract under which an insurance policy may otherwise expire on its own terms.

Pursuant to s.236(1), the insurer had a mandatory obligation to give notice of renewal or non renewal. The insurer did not do so in the circumstances. As a result, the insurance policy remained in force at the time of the accident by virtue of s.236(5).

The Court of Appeal found the arbitrator erred in law in finding the insurance policy expired at the end of the 6 month term. Accordingly, the appeal was allowed.